Deferred-delivery share compensation is a practical term for arrangements promising shares in advance and delivering them after conditions are met. RSUs, under which a predetermined number of shares is delivered after a period of service or similar conditions, are one example. This article also addresses arrangements for future delivery of share acquisition rights, which tax law treats together as fixed-number compensation; the rights themselves are not called RSUs. The statutory framework can be understood through four provisions: Corporation Tax Act Articles 34, 54 and 54-2, and Order Article 71-3. The sequence is reversed compared with specified restricted shares (restricted stock), where shares are delivered first and restrictions lapse later.

Statutory definition

“Where delivery of shares or share acquisition rights as remuneration based on an arrangement to deliver a fixed number of shares (...) or share acquisition rights at a specified time for duties of an officer of a domestic corporation (... hereinafter ‘fixed-number compensation’ in this Article) occurs on normal transaction terms, the expense amount for that compensation, excluding compensation in specified restricted shares or successor restricted shares under Article 54(1) of the Act (...) or specified share acquisition rights or successor share acquisition rights under Article 54-2(1) (...), shall equal the unit value on the date the arrangement was made of shares or rights of the same issue as those delivered, multiplied by the number delivered (... hereinafter ‘value at the delivery resolution’ in the following paragraph).”

Article 71-3 of the corporation tax Order values expenses under an advance arrangement to deliver a fixed number of shares or rights—fixed-number compensation—using unit value on the date of the arrangement multiplied by the number delivered (value at the delivery resolution), rather than value at receipt. Compensation in specified restricted shares or specified share acquisition rights under Corporation Tax Act Articles 54 and 54-2 is excluded.

Overview

How do Corporation Tax Act Articles 34, 54 and 54-2 and Order Article 71-3 fit together?

Article 34 lists among deductible remuneration “remuneration based on an arrangement to deliver, at a specified time for an officer's duties, a fixed cash amount, a fixed number of shares (...) or share acquisition rights, or specified restricted shares under Article 54(1) (...) or specified share acquisition rights under Article 54-2(1) (...) relating to a fixed monetary claim, which is neither regular equal-amount remuneration nor performance-linked remuneration (...).” Article 54 determines expense timing where shares are delivered subject to transfer restrictions; Article 54-2 does the same for share acquisition rights. Fixed-number compensation delivered only after conditions are met, without either type of restriction, is governed by Order Article 71-3.

What are “specified” restricted shares and “specified” share acquisition rights?

Article 111-2 of the corporation tax Order defines the scope of restricted shares, and Article 111-3 defines restricted share acquisition rights. Article 111-3 states: “Share acquisition rights prescribed by Cabinet Order under Article 54-2(1) of the Act (Special provisions, etc. on the business year of expenses in consideration of share acquisition rights) shall be rights with transfer restrictions or other special conditions prescribed in Article 84(3) of the Order for Enforcement of the Income Tax Act (Value of restricted shares, etc.).”

Within that scope, Article 54 itself sets the “specified” requirements. It defines specified restricted shares as those satisfying either “the restricted shares are delivered to the individual in exchange for contribution of a claim arising to the individual as consideration for the services,” or “in addition to the preceding item, the restricted shares are substantively regarded as consideration for the services.” Article 54-2 defines specified share acquisition rights in the same structure.

How do listed companies deliver shares and rights without payment?

Article 202-2 of the Companies Act provides the basis for delivery of shares without payment. It states that a stock company issuing shares listed on a financial instruments exchange under Article 2(16) of the Financial Instruments and Exchange Act, when soliciting subscriptions ..., need not determine the matters in Article 199(1)(ii) and (iv). Instead, it must specify that shares are issued or treasury shares disposed of as directors' remuneration (...) without requiring payment of money or contribution of property under Article 199(1)(iii), and specify the allotment date. Article 209 states: “Notwithstanding paragraph (1), ... subscribers become shareholders of the subscribed shares on the allotment date.”

Article 236 of the Companies Act provides the basis for issuing share acquisition rights without payment. It states that a stock company issuing shares listed on a financial instruments exchange under Article 2(16) of the Financial Instruments and Exchange Act, when issuing rights ..., need not include the matter in paragraph (1)(ii) in their terms, but must include the following matters. These include that the rights are issued as directors' remuneration or in exchange for payment using that remuneration, and that exercise requires neither cash payment nor contribution of property under paragraph (1)(iii).

How is the individual recipient's income classified?

For ordinary RSUs, shares are acquired after service or other conditions are met. Economic benefits based on employment or similar relationships are generally employment income under Income Tax Act Articles 28 and 36, measured when the shares are acquired and the benefit enjoyed. The following special rule concerns shares delivered with additional transfer restrictions; a promise of future share delivery alone does not trigger it.

Article 84 of the income tax Order states that, where an individual provides services to a corporation and receives as consideration restricted shares satisfying the listed requirements (“specified restricted shares”), the value under Article 36(2) (Revenue) for those shares or successor restricted shares is their value on the date transfer restrictions (...) lapse (...). Income Tax Basic Circular 23–35 Common-5-2 provides: “Where specified restricted shares, etc. are found to have been delivered by reason of an employment contract or similar relationship with the delivering corporation, the income shall be employment income. However, where restrictions are found to have lapsed by reason of the recipient's retirement, it shall be retirement income.”

Points that require care in practice

• Deferred-delivery arrangements do not deliver shares or rights until conditions are met. Whether restrictions remain upon delivery depends on the design, so the extent to which Article 84 applies requires examination of the individual contract or rules.
• Article 71-3 of the corporation tax Order does not list criteria for determining “normal transaction terms.” The circumstances and conditions of delivery must be examined individually.
• Where shares are delivered through a trust, whether the transaction is issuance of subscription shares or disposal of treasury shares, and the relevant allotment date, must be determined individually from the trust agreement and delivery rules.

Legal basis

• Order for Enforcement of the Corporation Tax Act, Article 71-3(1) (Expenses, etc. for remuneration based on an arrangement to deliver a fixed number of shares) / Quoted wording: “Where delivery of shares or share acquisition rights as remuneration based on an arrangement to deliver a fixed number of shares (including capital contributions; hereinafter the same in this Article) or share acquisition rights at a specified time for duties of an officer of a domestic corporation (... hereinafter ‘fixed-number compensation’ in this Article) occurs on normal transaction terms, the expense amount for that compensation, excluding compensation in specified restricted shares or successor restricted shares under Article 54(1) of the Act (Special provisions on the business year of expenses in consideration of restricted shares) or specified share acquisition rights or successor share acquisition rights under Article 54-2(1) (Special provisions, etc. on the business year of expenses in consideration of share acquisition rights), shall equal the unit value on the date the arrangement was made of shares or rights of the same issue as those delivered, multiplied by the number delivered (... hereinafter ‘value at the delivery resolution’ in the following paragraph).”
• Corporation Tax Act, Article 34(1)(ii) (Nondeductibility of officers' remuneration) / Quoted wording: “Remuneration based on an arrangement to deliver, at a specified time for an officer's duties, a fixed cash amount, a fixed number of shares (including capital contributions; hereinafter the same in this paragraph and paragraph (5)) or share acquisition rights, or specified restricted shares under Article 54(1) (Special provisions on the business year of expenses in consideration of restricted shares) or specified share acquisition rights under Article 54-2(1) (Special provisions, etc. on the business year of expenses in consideration of share acquisition rights) relating to a fixed monetary claim, which is neither regular equal-amount remuneration nor performance-linked remuneration (...).”
• Corporation Tax Act, Article 54(1) (Special provisions on the business year of expenses in consideration of restricted shares) / Quoted wording: “The restricted shares are delivered to the individual in exchange for contribution of a claim arising to the individual as consideration for the services.” “In addition to the preceding item, the restricted shares are substantively regarded as consideration for the services.”
• Corporation Tax Act, Article 54-2(1) (Special provisions, etc. on the business year of expenses in consideration of share acquisition rights) / Quoted wording: “In place of payment in exchange for the restricted share acquisition rights, a claim arising to the individual as consideration for the services is set off.” “In addition to the preceding item, the restricted share acquisition rights are substantively regarded as consideration for the services.”
• Article 111-3, Paragraph 1 of the Order for Enforcement of the Corporation Tax Act (Scope of Stock Acquisition Rights with Transfer Restrictions, etc.) / Quoted text: "The stock acquisition rights specified by Cabinet Order provided for in Article 54-2, Paragraph 1 of the Act (Special Provisions, etc., Concerning the Business Year of Attribution of Expenses with Stock Acquisition Rights as Consideration) shall be those subject to restrictions on the transfer of rights and other special conditions provided for in Article 84, Paragraph 3 of the Order for Enforcement of the Income Tax Act (Value of Shares with Transfer Restrictions, etc.)."
• Article 111-2, Paragraph 1 of the Order for Enforcement of the Corporation Tax Act (Scope of Restricted Stock, etc.) / Quoted text: "Restrictions on transfer (including the creation of security interests and other dispositions) are in place, and a period pertaining to such restrictions on transfer (referred to as the "transfer restriction period" in the following item) is established." "Events are provided under which a domestic corporation receiving the provision of services from the individual referred to in Article 54, Paragraph 1 of the Act, or the corporation that issued the shares or delivered them to the individual referred to in the same paragraph, will acquire the shares without consideration (limited to events based on the work status of the individual, such as the individual referred to in the same paragraph who has received the delivery of the shares failing to continue working for a predetermined period within the transfer restriction period, or the work performance of the individual not being favorable, or events based on the status of business performance or other indicators of these corporations, such as the business performance of these corporations failing to reach a predetermined standard)."
• Article 202-2, Paragraph 1 of the Companies Act (Special Provisions for Determination of Matters Pertaining to Solicitation Relating to Director Remuneration, etc.) / Cited wording: "A stock company that issues shares listed on a financial instruments exchange prescribed in Article 2, Paragraph 16 of the Financial Instruments Act is not required to provide for the matters set forth in Article 199, Paragraph 1, Item (ii) and Item (iv) when making a solicitation of persons to subscribe for shares to be issued or treasury shares to be disposed of by it in accordance with provisions concerning the matters listed in Article 361, Paragraph 1, Item (iii) pursuant to the articles of incorporation or a resolution of a shareholders meeting." "to the effect that shares pertaining to such solicitation are to be issued or treasury shares are to be disposed of as director remuneration, etc. (meaning remuneration, etc. prescribed in Article 361, Paragraph 1; the same applies in Article 236, Paragraph 3, Item (i)), and that neither the payment of money in exchange for the solicited shares nor the delivery of property under Article 199, Paragraph 1, Item (iii) is required" "the day on which solicited shares are allotted (hereinafter referred to as the 'allotment date' in this Section)"
• Article 209, Paragraph 4 of the Companies Act (Time of Becoming Shareholder, etc.) / Quoted text: "Notwithstanding the provisions of the first paragraph, if there is a provision on the matters listed in the items of Article 202-2, Paragraph 1 pursuant to the provisions of the second sentence of that paragraph, a subscriber for shares for subscription shall become a shareholder of the shares for subscription subscribed for by them on the allotment date."
• Companies Act, Article 236(3) (Terms of share acquisition rights) / Quoted wording: “A stock company issuing shares listed on a financial instruments exchange prescribed in Article 2(16) of the Financial Instruments and Exchange Act need not include the matter in paragraph (1)(ii) in the terms of share acquisition rights issued in accordance with provisions on matters listed in Article 361(1)(iv) or (v)(b) established by the articles of incorporation or a shareholders' meeting resolution. In that case, the company must include the following matters in the terms.” “That the rights are issued as directors' remuneration or in exchange for payment using such remuneration, and that exercise requires neither cash payment nor contribution of property under paragraph (1)(iii).”
• Order for Enforcement of the Income Tax Act, Article 84(1) (Value of restricted shares, etc.) / Quoted wording: “Where an individual provides services to a corporation and receives as consideration restricted shares satisfying the following requirements (hereinafter ‘specified restricted shares’ in this paragraph) (...), the value under Article 36(2) of the Act (Revenue) relating to those shares or successor restricted shares shall be their value on the date restrictions on transfer (including creation of security interests and other dispositions; the same applies in paragraph (2)(i)) lapse (if the individual dies before that date, for shares for which it is established at death that the circumstances in paragraph (2)(ii) do not apply, the date of death).”

Relevant administrative guidance, Q&A, and cases

• Income Tax Basic Circular 23–35 Common-5-2 (Income classification when restrictions on transfer of specified restricted shares, etc. lapse) / Quoted wording: “Where specified restricted shares, etc. are found to have been delivered by reason of an employment contract or similar relationship with the delivering corporation, the income shall be employment income. However, where restrictions are found to have lapsed by reason of the recipient's retirement, it shall be retirement income.”

Additional Authorities and Sources

• Ministry of Economy, Trade and Industry, “Use of Incentive Compensation Systems According to Growth Stage,” page 8
• Financial Services Agency, materials published November 26, 2024 (terminology for deferred-delivery shares, RSUs)
• Income Tax Act (e-Gov)

Sources checked September 7, 2026.